Executive Briefings

Why Does Supply Chain Risk Management Rank So Low? Most Companies Are Reactive, Not Proactive.

By: Supply Chain Shaman 04.22.2014

In 2013, 80 percent of supply chain leaders had a material supply chain disruption. It was not just one. The average company had three. Yet, in a study that just completed, when asked about business pain, supply chain risk rates low. How come?

It is new. It lacks a consistent definition and set of practices. Companies reward the urgent. Risk management requires a focus on the important. It requires leadership and orchestration. Teams don’t know what to do. The companies that are the most mature learned the hard way. They had a disruption.

Let’s start with a definition. For the purposes of the study that we just completed, we defined supply chain risk management as the proactive identification and resolution of potential risks to the supply chain. The key word in this sentence is proactive. Unfortunately, too many supply chains are reactive. The systems respond, but they do not sense. Performance is measured by indicators, not by performance predictors. The reward systems focus on the urgent, not the important.

It is new. It lacks a consistent definition and set of practices. Companies reward the urgent. Risk management requires a focus on the important. It requires leadership and orchestration. Teams don’t know what to do. The companies that are the most mature learned the hard way. They had a disruption.

Let’s start with a definition. For the purposes of the study that we just completed, we defined supply chain risk management as the proactive identification and resolution of potential risks to the supply chain. The key word in this sentence is proactive. Unfortunately, too many supply chains are reactive. The systems respond, but they do not sense. Performance is measured by indicators, not by performance predictors. The reward systems focus on the urgent, not the important.